The scope of definition of ‘income’ u/s.2(24) was widened by the Finance Act, 2004 by providing that ‘income’ would also include any sum referred to in Section 56(2)(v). Section 56(2)(v) was introduced to provide that, “where any sum of money exceeding Rs.25,000 is received without consideration by an Individual or HUF from any person on or after the 1st September, 2004, the whole of such sum shall be chargeable to tax as Income from Other Sources.”

However, with effect from 1st April, 2006, it came to be provided vide Section 56(2)(vi) that such receipts from one or more persons aggregating to more than Rs.50,000 in a financial year shall be treated as income in the hands of the recipient individual or HUF.

GIFTS IN KIND ALSO TAXABLE AS INCOME

Section 56(2)(vi) had cast income-tax liability only in respect of a ‘gift of any sum of money exceeding Rs.50,000’. In view of this clear language, any gift received in kind (not being any sum of money) clearly fell outside the liability for income-tax, irrespective of the value of such gift.

However, as per the new provisions of Section 56(2)(vii) introduced with effect from 1st October, 2009, in case of nine specified properties as mentioned hereunder, received by an individual or HUF, either by way of gift or for a purchase consideration that is treated by the Assessing Officer as inadequate, the market value of such gift or the differential value of such purchase, if exceeding Rs.50,000, is taxed as income from other sources:

Land and building;

Shares and securities;

Jewellery;

Archaeological collections;

Drawings;

Paintings;

Sculptures;

Any work of art;

Bullion (with effect from 1st June, 2010).

Interestingly, with only nine properties specified in the hit list, a host of other valuables such as motor cars, electronics, furniture, air tickets etc. have still been kept out of the tax purview and you can thus continue to enjoy the luxury of receiving gifts of any of these even now.

EXCEPTIONS CARVED OUT

In the above regard, exceptions have been carved out in respect of any sum of money received from any relative (as defined for purpose of this section) or on the occasion of the marriage of the individual or under a will or by way of inheritance or in contemplation of death of the payer or receipts from any local authority as defined in Section 10(20) or fund, foundation, university, educational institution, hospital or other medical institution referred to under Section 10(23C) or receipt from any trust or institution registered under Section 12AA and accordingly such receipts will be exempt from tax.

GIFTS FROM SPECIFIED RELATIVES EXEMPT

One of the important exceptions provided, in regard to taxing gifts as income, is in respect of sums received by any individual from his/her relative out of natural love and affection. For this purpose, the term ‘relative’ has been defined to include the individual’s spouse, brother or sister of the individual or spouse, brother or sister of either of the parents of the individual, any lineal ascendant or descendant of the individual or spouse and finally the spouse of any of the above-referred persons.

Thus, apart from the closest members of the immediate family such as husband, wife, parents, grandparents, children, grandchildren, brothers and sisters, even paternal and maternal uncles and aunties (such as Kaka-Kaki, Mama-Mami, Masa-Masi, Foi-Fua) spouses of brothers and sisters (such as Bhabhi, Banevi) and in-laws (such as Bahu, Jamai, Sasu-Sasra, Sala-Salaveli, Sali-Sadhu, Nanand-Nandoi, Jeth-Jethani, Diyar-Derani) have been empowered to give tax free gifts without any monetary limits.

However, it needs to be noted that cousins,be noted that cousins, nephews and nieces have been kept out of the specified list. So do not miss to think about the tax consequences, before receiving any gifts from them.